Page 69 - The Corporate Report Pack

Governance and tax: Divide and conquer
Introduction
Measured in terms of nancial interest alone, the South African Revenue Service (SARS) must be the biggest stakeholder in most companies. If one considers just income tax, employees’ tax and value- added tax (VAT), the total annual liability can easily exceed the pro ts of the company.
e Tax Administration Act, 2011 (TAA) now places onerous responsibilities on the company to ‘come and play, or face a range of serious consequences’.
Closer to the point is section 76 of the Companies Act:
• In discharging his duties a director is entitled to rely on the performance of other persons to whom the board in entitled to, and has delegated authority.
• A director may also rely on information, opinions, recommendations, reports and statements prepared by reliable and competent employees, legal counsel, accountants and other professional persons retained by the company for their skills and expertise as well as on a committee of the board.
Matthew Lester
e Tax Administration Act is not prescriptive in how a company manages its tax a airs. It merely contains substantial consequences for the company that falls short of the benchmark.
Some say that every board of directors should include a tax expert.
A serious infringement of TAA could trigger implications in terms of section 76 of the Companies Act as it would be di cult to argue that it is not the reasonable responsibility of the board to ensure that the company complies with tax legislation.
Some say that every board of directors should include a tax expert. In the past, this was o en presumed to be the chief nancial o cer (CFO). But today that may be a lot to expect. Others argue that every company should establish a separate tax committee. ese recommendations are too prescriptive and will not necessarily yield results in a cost-e cient manner.
e Tax Administration Act is not prescriptive in how a company manages its tax a airs. It merely contains substantial consequences for the company that falls short of the benchmark.
In order to e ciently achieve the objective of good tax management, it is useful to split a company’s tax a airs into (i) the tax compliance function and (ii) the tax risk function.
e tax compliance function
For more than 100 years, the Tax 101 course has started o with the de nition of ‘gross income’ in section 1
The Corporate Report 3